Is Your Teen’s College Financially Safe? What Parents Must Know About College Closures and Risk

Parents, is your teen college ready? Are you feeling overwhelmed, stressed out, or excited about your teen applying to college? Do you know what colleges are looking for? And if your kid gets in, do you know what you'll pay for it? College admission has never been so competitive or expensive. Shellee Howard will take you on a journey to help you and your teen get college ready. Now here's your host, Shellee.

Well, hello parents, this is Shellee Howard once again with Parents, Is Your Teen College Ready? Today I have a wonderful guest. He's going to share some interesting, fascinating things you probably never even thought about. Welcome to the show, Mr. Gary Stocker.

Shellee, thanks for the invitation. Always a pleasure to chat with you, ma'am.

All right, so Gary, can you tell our listeners a little, give them a little idea of who you are, what you do, and why they would wanna listen.

Well, you know the old adage, you never know what you're gonna grow up to be. Well, that's kind of true for me, Shellee. Believe it or not, even though we'll talk higher education for the next few minutes, my background is in the medical laboratory. I'm a medical laboratory scientist by training, and I have teased folks and seriously shared, I have saved lives and cured diseases over the years. And I worked in hospitals and I worked in evenings and days and nights. I've managed hospitals. So my background is in medical laboratory, but it was in the last 15 years or so I got my doctorate. It was in organizational behavior and organizational management and had the chance to work as a chief of staff for a small college president in mid-Missouri, Westminster College. Its claim to fame is the Winston Churchill Museum, Shellee Howard, and if you're ever in mid-Missouri, it's a fascinating display of what Winston Churchill was all about back in World War II and prior to that. And so, in that timeframe, we got out to Westminster and we realized this was a college that was effectively spending down their endowment to keep the lights on and to meet payroll. And the president said, "Gary, find me some potential merger partners." Now, this was 10 years ago. This was 2015 before mergers were a big deal. And when I did the initial research, there was nothing out there. I'm not there on the financial health of colleges. So, I got back to St. Louis a couple years later, realized there was an opportunity. And Shellee, in 2019, I founded College Viability, and since then I have done research on the financial health and viability of public and private colleges, and I've created a series of apps, and we'll probably talk about those apps as we continue our conversation.

So parents, this is going to be amazing because I think that you're going to be quite surprised. We think colleges want to take all our money, and they're billionaires, and there's so much money because they've taken all our money. And now Gary's gonna talk a little bit about, so tell us Gary, how is the world of colleges doing financially?

Not well at all. And I'll share a couple stories with you. And the first one is in the first half of 2024, a year ago, Shellee Howard, there was one private college closing per week. Now that rate has slowed down quite a bit since then, but all summer long, both public and private, small and large, small and large have been saying through a variety of media sources, We are cutting back programs and we are laying off faculty and staff. Now, you're not going to see that on the front page of the newspaper or the front page of the website because colleges frankly don't really want to share that information for obvious reasons. If you and I think— if we're looking at a college for our children and we think a college is in financial trouble, clearly that might be an indication not to consider that college. And what has evolved from this business is creating tools and communications like this with you, Shellee Howard, where we share the reality that private colleges in particular, all non-urban private colleges more specifically, are in financial straits. And to the extent that it is quite likely that we will continue to see an increasing rate of closures. And sadly, one of the things that's happened in the last few years is these closures aren't— sorry, they're not announced very far in advance. There are examples of colleges announcing their closure on Friday, and locking the doors on Monday. Now that doesn't happen all the time, but many times, for example, this past spring we had colleges announce their closure in March, April and lock their doors either after the May commencement or as the summer term ended. There are exceptions to that, but for the most part, colleges, they so close to the vest for obvious reasons, you and I would do the same thing, that they're not sharing the financial straits that they have. And we're not gonna look at data today, but I do regularly, I do The College Financial Health Show on Tuesdays. And we look at charts, and you don't need me to look at the downward trend of so many of these colleges in enrollment, in revenue. Expenses are going up. There's an article today about preventive maintenance, and the maintenance requirements for colleges, both public and private across the country, is close to $1 billion. And that's a safety issue. And there was a college this week that announced they had to move their students out of a dorm, and the name escapes me, my apologies. Because there was mold on the wall. Well, I went and looked at their numbers 'cause that's what I do. I'm a data nerd. If you look closely, that's written across my forehead there. And sure enough, they had not been invest— they had been investing below the minimum. And I'm not gonna go Major League Baseball on you here, below the minimum required to maintain the infrastructure, the property, the plant and equipment at that college. It's awareness. And so talking to your parents, you have to step out for a second, Shellee Howard, as I talk to your parents face to face. Here's, here's to think about, especially, especially if we're considering small privates and small non-urban privates, look at their financial health first. And I'll give you some resources you can do that. Make that the first item on your checklist. And here's why, Shellee Howard, there will be some colleges closed. There's no question. And I'm not the only one saying that, but it's the colleges that don't have the financial resources to provide the type of quality college education you and I had, our children had. That's what concerns me, that these colleges can scrape together enough money to not have to close the doors, to meet payroll, to keep the lights on, those kind of things, but not provide the updated software, the updated hardware, the new microscopes, um, all the kind of things that make a quality college education available to most students.

So parents, I told you that was a shocker to me. Because we don't often hear about that. When you go on a college tour, nobody's talking about, well, we might not be here next year. They're, they're, right? So Gary, what happens to those kids that might have been juniors, sophomore, freshmen when a school closes?

Well, there's, there's a couple of things going on and I'll answer that question first. We talked about the short notice closures. That's a real risk. And that's why looking at the financial health is important, and I'll give you some tools before we get off. If the college closes, there are some requirements that the college must undergo, and something called the teach-out agreement that effectively guarantees that the major your child chose will be offered through another college, right? So College A closes, College B takes that student and gets them their bachelor's in business or biology or whatever the case may be. And that's fine and it works, but what I find in the research and the data that I look at is that many of these teach-out partners that a college will contact and say, "Hey, teach out the students we're losing because we're closing," those colleges themselves are at financial risk, maybe not of closing, some will be, but providing that same type of quality, well-resourced education that you and I and all of us want for our children when they go off to college.

Wow. You know, we college lists and we take it so serious. I mean, into them and I toured 25 colleges every year. I used to do it every semester, but I'm getting too old for that. So I mean, I'm my fair share for sure. And I, I'm happy to say that none of the colleges I've toured have gone out of business, but I think what we're hearing, at least what I'm hearing from you, is it's not the pack, it's not the big, you know, schools. It's more of the small, uh, less schools, I guess. And so why would a student even apply to those? Like, help me understand, like, where's it coming from?

Well, I mean, the easy one is small, and small colleges sell small, all right? If you want to buy that, that's fine. But those, those, they offer— you get what you pay for, right? And here's what's happened. I'll kind of duck in. Let's talk about tuition. And let's say you're looking at a small private college in a rural area and their tuition price is listed at $40,000. First of all, don't be scared by that. You're, you're not going to pay $40,000 right off the bat. They're discounting that 50% or more, and the number now is above 50%. So a $40,000 list price becomes something less than $20,000. Now here's what they do. And you and I are all culpable for this. They say, "You've got the presidential scholarship for $20,000," or, "Your child is so smart, we're giving them $15,000 in merit aid." Those are simply hidden as discounts, the same kind of discounts, Shellee, you and I get on cars, clothes, and computers. But colleges are very good at positioning that. I've even had college presidents share with me, an indictment for parents in some ways, that their parents at this college, I presume at others as well, At this college, their parents have told him they prefer the high price, high bottle. And you and I know why, right? Because now we can tell grandpa and grandma, moms and dads and neighbors that our child, our daughter, our son got a $45,000 scholarship to go to this college. And in fact, it is a discount. I'll reinforce this, that $20,000, there are no funds being transferred from one account in the college to that student's account. It is plain and simple a discount. And if you want to shock your tour guide when you do that tour of the college, um, and they— you're eligible for this merit aid, ask them, well, that's just a discount, right? And see what happens.

Ooh, naughty. Okay, okay, there's got to be somebody who does it, you know. You know, parents, think about this. Uh, you know, when I met Gary and found out what he did, first I'm like, I know that was a thing, And secondly, I'm like, I need everybody to know because if I can save any of you from being put in that situation, then I feel like our work is done. So what are some things that families can, can do to protect themselves?

Well, you know, first of all, a caveat. College is wonderful. I've got the college viability. Rules. And, and the college viability— I can't think of the name of the term, but college is good is the first item. Go if you can. The third item is some colleges will close, most won't. And there are more that goes with the manifesto, the college viability manifesto. Millions and millions of students like the ones whose parents are listening to this podcast, and like you or yours, my children have fabulous, fabulous experiences, just fabulous. It's those on the periphery, and economics, it is called side view. In economics, it's those decisions that we make on the periphery that decide whether we go to colleges or not. Colleges are really, really good at getting you to enroll through discounts and saying, we've been here for 4,000 years, not quite, for lots of years, and we have all these majors and the campus is beautiful and you can play football or basketball, whatever the case may be. Here's something you wanna think about, then I'll give you the resource you can go in and look at in detail. Shellee, 50%, more than 50% of all American public and private 4-year nonprofit colleges graduate less than 50% of their students in 4 years. That is the hidden tragedy of what we're talking about, because I've done the math on this, and whether it's at the student's own volition or college closes, year 1, you're out something in the vicinity of $40,000. Part of that's additional tuition costs. Big part of that is the opportunity cost associated with that first year of income you could have had if you graduated on time. Colleges will enroll your students. They've got really good systems and processes to do that, but they don't have the systems and processes to do that. So what have I done, right, besides get on my soapbox and talk about these things? There is a website out there that I've created. It's called MyCollegeViability— one really long word— mycollegeviability.com. And for all the private colleges that are out there, you can get a free report. You can bring up any one of the 1,400 private colleges throughout the country, from the Harvards to the small ones in your rural areas, those kind of things. And you'll get an assessment of how that college compares. And I'll let you go there because it kind of gets in the weeds if I go much deeper than that. But go to mycollegeviability.com, you'll see a link on the side, free report. Click on that link, it'll ask you for the college, it'll search for the college, bring it up, ask for it. It's going to ask you some survey questions because we're trying to find out what folks— what the level of interest is in the financial health of colleges.

Wow. So, so much to think about. So when you are considering what colleges you want to add to your college list, having that report would be so helpful. Now, Gary, are you telling families that maybe they shouldn't go to college because there's a chance that the college will close?

I'm saying the first item— never would I say that, but I'm saying the first item on your checklist is not how pretty the campus is. What the faculty talk about, what the majors are, but is that college— and from mycollegeviability.com you can find out— is it financially healthy when compared to others? It's not just a standalone. You really want to compare that college to others, and we do that as well. That's the first checkmark in this day and age. Now, for the— you know, we don't do it for publics yet. We will at some point. But for the privates, you know, for really successful privates, the big privates, much, much of an issue. They're not going to close. They may cut back on majors, they may cut back on faculty, those kind of things. And let me digress for a second and talk about majors. Because one of the other tools I've created is something called the College Majors Completion App. So for some 2,700 public and private 2- and 4-year colleges, I track 9, 64, 64 high-volume majors, both across associate, bachelor's, and master's degree. And I show you which colleges graduate the most majors, all right? That's the description. Let's use an example of journalism, 'cause that's the one I always use. And you're looking at College A, and they graduate 5 journalists on average over the last 4 years. And you look at College B, and they graduate 45. Now just think to yourself intellectually, which is gonna have the stronger program, right? The one with 45. And which of those 2 colleges in this day and age when finances are tight, not as many students are going to college, When is that— a college with 5 journalism majors, it's at risk for closing that journalism major because they can't afford it any longer. No longer are the days, and this might be the pivotal year, when colleges can be everything to everybody, when they can offer 75 majors to 2,000 students. And so that College Majors Completion App, there's a simple version available for students and families. It uses 10 majors that we track. You want to look at that as well, because if you're looking at journalism or biology or sociology or a long list of 64, be careful. If your college has small numbers and it shows up in this app, ask them the question. You're going to get a rhetorical answer, but is this low enrollment major at risk of being closed?

It's interesting how you look at the low enrollment major, because we on this side look at it different. If a student is underqualified to get into a school, but they can get into a major that is at risk. And then they're like, I got into the school.

Yeah.

Now I'm gonna transfer majors. Like, there's a whole nother game on the other side of it that we've played before. Um, we have to be careful that what does that really mean? Why is it so low? And if you really want to be that major, you might be asking some deeper questions of what, how has this major been around? How are you seeing it phase out? Like, help me understand what's the depth of that.

And I guess talk about what that actual tour might be like. And you, you've talked about, you've done many tours before and you're doing that tour with a college student, right? Mm-hmm. And you ask them about majors. There's only 5 majors graduating on average in your journalism program. They're not gonna know the answer to that. You're going to need to be prepared as, as family, as students, and as, as parents asking for an additional resource to ask, why is it only 5? And what are the risks that these low enrollment majors like journalism or whatever the major may be— can you assure me, can you give me 100% assurance that that major will be there for 4 years for my child? Then you have to judge the answer on your own for sure.

Then you get to decide, am I willing to take if it feels like a risk, it may not. You may think, oh, that's totally fine. And everybody's risk tolerance is different, right? So we have to look at it from your perspective. Now, you, you talked about public schools and private schools. For families who obviously have thought about what that difference means, why aren't public schools failing at the same rate?

Well, it depends on how you define failing. In terms of graduation rates, it's very similar. Publics are not graduating— too many publics are not graduating at least half their students. That's my threshold. You may have a different threshold. I say it's 50%, right? I got colleges that don't graduate 50%, coin toss colleges for obvious reasons. You toss a coin whether you're going to graduate or not. So publics in this— say, in that sense, are doing just as poor, I guess, of a job as privates. But keep in mind that when you choose a private college, it is mostly, in most cases, tuition payments that provide the revenue source for that college. But in publics, it's your tuition revenue, even though it may be lower, but a large amount of public subsidies through a variety of sources. Public colleges rarely close. Now, Wisconsin has done that, Connecticut has done that, Georgia has done that. I'm missing— Ohio's thinking about doing that. They do that, but at great political risk and with great trauma to have that happen. So again, you know, enrollment trends and the apps that we have available, the College Viability app for parents Students and Families tracks enrollment for the last 8 years. And just this week I was doing my podcast, This Week in College Viability, and last week was a big week, Shellee Howard, for colleges saying we have great enrollment. So, you know, I nerd guy, right? So I read 41 news stories last week, and of the 41, 8 of those colleges said we have really great enrollment were accurate because I can look at the data. 8 of them were good. 28, not so much. 28 of those colleges spun the data over such short time periods or with such vague wording, they were clearly trying to spin modest to bad numbers the best they could. And again, you and I would do the same thing. That's why I'm here to say, hey, be careful. And then interestingly, there were 4 brave colleges who said our enrollment has dropped. So, you know, I have the alternative media source, if you will. Colleges can spin things and they will, and then they're welcome to do that. But when we catch them, we call them on it for obvious reasons.

Hmm. So if a parent would like to learn more or they want to chat with you or follow your podcast, how, how may they do that?

Well, start with My College Viability. There's all sorts of information there in addition to the free report. You're always welcome to reach out to me at Gary, G-A-R-Y, and @collegeviability, one really long word, gary@collegeviability.com. And I've, I've webinar, webinars on Zoom like this for other parents and groups of parents to, to talk about colleges. I'll be happy to do that. And, and why? These colleges are doing what's best for them. They have— the college presidents and board members have a fiduciary responsibility to protect that college. That's fine. But who's the fiduciary for the parents? Who's the fiduciary for the students? I make the case you need an independent resource like what we do at College Viability to be that fiduciary, to say, hey, enrollment has trended down for the last 8 years. Don't tell me you fixed it in 1 year. It just doesn't happen.

Interesting. Gary, is there anything else you wanna share with our listeners before we tune out today?

You know the Latin saying caveat emptor, right? Buyer beware. And culturally and historically have been entities we viewed with great passion, pride, and trust. I would make the argument based on the data, based on my experience, based on the news that that's dangerous mindset to have going forward, really for almost any college. But especially for those who would be financially challenged and the ones we talked about, Shellee, the smaller ones, the rural ones, the non-urban ones, and those for whom the data suggests they have overspent. We didn't even talk about that today. Overspent their revenue, overspent their expenses far in excess of their revenue. Again, I've got the tools, I can show you that. You don't even need me. You can see the picture on your screen and say, oh, that's not good.

No explanation needed.

Correct, correct.

Fantastic. Gary, thank you so much for being on our podcast, and we will definitely be, um, sharing all of the show notes. And thank you for your time, and, uh, we are grateful to have you on our side.

Shellee Howard, always a pleasure. Thank you.